The secrets behind the Big Easy’s comeback from Katrina

It was — but no one yet knew it — just days before Hurricane Katrina and the failure of the federal levee system would put 80 percent of New Orleans under water. And then-Mayor Ray Nagin was walking on air. A big time developer named Donald Trump had just committed to build a downtown condotel that would replace the Shell tower as the tallest building in the city. It was a feather in Nagin’s not-yet-sullied cap, as big a project as the moribund New Orleans economy had seen in decades. It would be a basis for bragging rights when Nagin — now a federal prisoner (through no fault of Trump’s) — faced re-election the following spring.

Ten years later, and with other cities and regions facing disaster around the world, New Orleans provides revealing lessons on the role business and economics did and — and didn’t — play in the city’s now notably vigorous recovery.

The early months after the flood were filled with dire warnings. The city’s muscular preservationist lobby, never too happy with Trump’s plan in the first place, now denounced it as a probable opening wedge in a Philistine campaign to seize the moment and win the kind of zoning variances that would turn an economically desperate Big Easy into Buffalo.

But forget Buffalo. How about Vegas? Nagin’s contribution to the nightmare vision of insensitive post-disaster development was to propose jumpstarting recovery by letting all the big downtown hotels become casinos. Fortunately, the plan went nowhere.

A more nuanced anxiety centered on what was called Disneyfication: To prop up the all-too-important tourist trade, New Orleans, it was feared, would contrive a fake version of the street culture that, without subsidy or any direction from City Hall, makes the French Quarter a living theater of pass-the-hat brass bands, jugglers, magicians and sketch artists operating against a backdrop of gorgeous old architecture.

“But predictions of doom remained a local currency… public assets would be privatized for profit and our social safety net would be shredded by the spawn of Milton Friedman.”

As it turned out, there was no reason to fret about either of the Donalds: Duck or Trump. The latter soon showed New Orleans the back of his hand and reneged on the condotel scheme. And somehow, wonderfully, the buskers and trumpet players and card sharps grew bored with Houston and Atlanta and found their way back to New Orleans, dispelling concerns that Disneyfication would replace them with hoop-skirted Voodoo queens and pirates from central casting.

But predictions of doom remained a local currency. The most pessimistic among us had read and admired free-market critic Naomi Klein’s “The Shock Doctrine” with its dire prophesy that our ravaged city would soon be no more than a lingering morsel of food stuck in the snapping fangs of “disaster capitalism.” As in Pinochet’s Chile — Klein’s analogue to what lay ahead — public assets would be privatized for profit and our social safety net would be shredded by the spawn of Milton Friedman and other Chicago School economists who figured importantly among Pinochet’s advisers.

Consistent with such predictions, Nagin signaled that he was open to the idea of turning the storied and shattered working-class neighborhood known as the Lower 9th Ward into a sprawling factory for the production of prefab housing to replace the tens of thousands of residential units rendered uninhabitable by the flood — another half-baked idea that went nowhere.

What looked like an apocalypse to the left held promise for many conservatives. Katrina was an opportunity to reinvent a corrupt and industrially fading city that had come to be called the hemisphere’s northernmost banana republic.

The Wall Street Journal caught up with one plutocrat who had fled to Texas and quoted him saying, in an unguarded moment, that if the city didn’t seize the opportunity to offload a good part of its sizable underclass — that is, poor blacks — he and his buddies were done, never coming back. The more wholesome dream was that rebuilding after Katrina might be an opportunity to diversify an economy way too dependent on tourism.

Fortunately, reality delivered neither Klein’s vision of full-bore disaster capitalism nor the ethnic cleansing the plutocrat seemed to yearn for. Unfortunately, it also didn’t do much to diversify the economy. The city remains as dependent on tourism and conventions as before.

Indeed, to a startling degree Corporate America was a no-show in the early going. Trump wasn’t the only one to pull out. Chevron beat a retreat and moved its regional headquarters to a distant suburb. (Shell was the exception; it chose to double down on New Orleans, not only by remaining in place but becoming a Medici of local arts and cultural sponsorship.)

It would be the better part of a decade before corporate America blessed New Orleans with more routine levels of investment, especially in the areas that flooded heavily, in particular New Orleans East, a vast swath of the city that is home to many black millionaires as well as a substantial part of the black middle class. Years passed before Walmart set up shop and made groceries available in any abundance. The huge mall that was once the center of retail out that way remains a parking lot; its movie multiplex but a memory.

“Equally notable has been the eruption of ‘social entrepreneurship,’ usually nonprofit outfits with a business plan but more interested in doing good than doing well.”

In place of Trump or Chevron or a prefab housing plant, the energy in the business sector has been home-grown and entrepreneurial. Start-ups began to dominate the local economy in ways they hadn’t for as long as anyone could remember. Even with the population still off by a quarter, there are more restaurants in New Orleans today than there were before Katrina. Magazine Street, once a miles-long parade of used furniture stores and vacant plate glass windows now hops with boutiques and galleries, financial services firms, and inevitably, more restaurants.

Equally notable has been the eruption of “social entrepreneurship,” usually nonprofit outfits with a business plan but more interested in doing good than doing well. In essence, what happened was this: Folks in the army of churchgoers, youth groups and adventure seekers who came down to help rebuild immediately after the storm fell in love with New Orleans. After helping to gut our houses and ladle soup, they decided to stay. Freshly minted college graduates began doing the same thing — many of them Teach for America recruits attracted to the city’s convulsive effort to shake alive the previously abysmal public school system.

The big foundations were hugely important in the recovery’s early hours as were the universities. Out-of-state institutions flooded the city with students and professors who saw New Orleans as a living laboratory for social change. Locally, despite (or because of) staggering devastation of their campuses, Tulane and Xavier in particular figured out ways to turn disaster into an opportunity to rethink both curricula and their mission. Applications have soared.

Utterly unexpected 10 years ago, New Orleans has become a hot town for twenty- and thirty-somethings, one of the last places in America still cheap enough for a would-be film-writer, rock star or world-saver to support herself quite nicely with a day job waiting tables.

But here’s where the story gets a little edgier, because even if Big Capital chickened out in the early going, New Orleans hardly staged the comeback on its own, even counting all that help from Big Philanthropy. Federal subsidies became available through the post-Katrina Gulf Opportunity Zone and accounted for what little new development the region saw in the first few years (alas, a woefully small part of it within New Orleans city limits.)

The single biggest construction project, not counting the $14 billion federal levee upgrade and the $10 billion in federal money allocated for home reconstruction through the botched Road Home program, was not a Trump hotel; it was the giant — some say oversized and doomed to fail — public hospital complex that the Veterans Administration and Louisiana State University have built a few blocks from their old digs.

And tax breaks and giveaways at the state level powered New Orleans already burgeoning movie and TV industry into rivalry today with Hollywood itself.

In sum, capitalism has hardly been the rampaging jihad that Klein foresaw; it has seemed to need an awful lot of handholding by the nanny state. Where the shock doctrine has come closest to fulfillment, perhaps, has been in the overhaul of the city’s once enormous inventory of public housing.

Amid seething controversy, a year after Katrina the City Council voted unanimously to accept hundreds of millions in federal aid to tear down and rebuild the four biggest projects, containing some 5,000 units. Advocates for low-income tenants were outraged that this meant refusing to reopen the old projects — albeit government-run ghettos — at a time of housing shortages. The flood and high winds had already KO’d over 100,000 housing units, some of them irreparably.

And, yes, capital was given a role in the construction and management of the new developments. The overhaul was conducted under the Hope VI program, a Clinton-era confection that (1) strives to replace old uniformly low- to no-income projects with mixed-income communities and to do so (2) through public-private partnerships — again an instance of government helping poor old capitalism to the buffet table.

Rent and real estate prices have shot skyward — by as much as 50 percent in some neighborhoods according to recent tabulations. The prices pose an obvious problem for the still substantial part of the New Orleans population that lives below the poverty line, including the influx of Mexican and Central American workers who came north to help us put our world back together.

Where true believers also try to apply Kleinian analysis is in explaining the takeover/makeover of what, in 2005, were notoriously crappy public schools, a nearly all-black system that had been largely abandoned for decades by both whites and the Creole elite. Here the shock doctrine offers initial insights, because, without doubt, the agents of a sweeping shake-up saw disaster as an opportunity worth exploiting for radical change. It’s the disaster-capitalist part of the narrative that proves to be kind of a poor fit.

Yes, the entire public school payroll was laid off and the teachers’ union effectively busted within weeks of the storm. Those actions — along with the deeply counterproductive decision to shut the schools down for an entire year — was the work of the duly elected and deeply dysfunctional parish school board, though both decisions are frequently and wrongly attributed to state-level officials who masterminded the ensuing takeover.

For their part, the state bureaucrats — frantic to restore some semblance of public education on a much faster timetable — activated something called the Recovery School District. It was a receptacle for failing schools that, despite its Katrina-esque name, had been authorized by the state legislature two years before the disaster. And yes, after taking over every New Orleans public school that failed to meet minimum academic standards — the vast majority — it is true that the state technocrats favored and fostered the charter school management model.

“In sum, capitalism has hardly been the rampaging jihad that Klein foresaw; it has seemed to need an awful lot of handholding by the nanny state.”

Today, all but a handful of the city’s 100-plus public schools are chartered. It is fashionable for critics of the shake-up to say they have been “privatized,” which might be a classic instance of disaster capitalism at work except for this: the schools are tax-payer financed, their boards volunteer, and they must meet state standards for curriculum and student performance.

That the radically transformed system has made huge strides, particularly in the academic performance and college readiness of black males, is a source of disappointment to those who believe chartering amounts to slipping a public asset into the pockets of fat cats. In fact, the few for-profit management teams that convinced a charter to give them a try mostly failed and have been run out of town.

The anniversary has provided us with an opportunity to look back and look ahead. The big takeaway is that post-disaster corporate capitalism turned out to be a frail sister to homegrown entrepreneurship, philanthropy and good old government money.

Incidentally, New Orleans also provided a textbook test of stimulus spending’s impact. The Keynesians were right. The ’08-’09 financial crash swept past New Orleans like a hurricane veering back toward Florida. With billions flowing from Washington, official employment levels barely dipped. (The upstate fracking boom further juiced the economy, though of course that sector is now sputtering.)

But while much of New Orleans has been revived, some efforts died aborning. The overhauled housing developments are a source of delight to the residents lucky enough to have landed a lease. But one selling point of the do-over was that de-ghettoizing the poor would somehow mitigate the city’s crime problem. It hasn’t. Drug dealing and violent crime remain stunningly rife in New Orleans. The bad guys have merely scattered.

Nor has New Orleans’s resurgence brought huge swaths of people out of poverty. Our child poverty rate stood at 38 percent before Katrina. It dipped for a few years. Today, 39 percent of young New Orleanians are deemed to be living in poverty.

Some economic issues are immune to recovery.